INFORMATIONAL

TO:

Division Superintendents

FROM:

Jo Lynne DeMary

Superintendent of Public Instruction

SUBJECT:

2006-2008 Biennial Budget as Introduced by Governor Warner

Governor Warner presented his 2006-2008 biennial budget on Friday, December 16, 2005, before a joint session of the Senate Finance, the House Appropriations, and the House Finance committees. This budget will be considered by the 2006 Session of the General Assembly, which is scheduled to convene on January 11, 2006. The Governor’s introduced budget for the 2006-2008 biennium covers fiscal year 2007 (which begins July 1, 2006, and ends June 30, 2007) and fiscal year 2008 (which begins July 1, 2007, and ends June 30, 2008).

The Governor’s recommendations for the 2006-2008 Direct Aid to Public Education budget include increased funding for technical revisions that update state funding for the most recent prevailing cost estimates, inflation, and enrollment estimates, as well as funding for new initiatives. In summary, the Governor’s proposed budget provides funding for the state share of all SOQ programs, and the continuation of all existing incentive, categorical, and school facilities programs. Overall, total state funding for public education in the 2006-2008 biennium will increase by approximately $1.5 billion over the fiscal year 2006 base.

Attachment A to this memorandum provides summary information on the funding changes proposed by the Governor for the 2006-2008 Direct Aid budget. Budget proposals for the department’s Central Office budget that pertain to school divisions are also summarized in Attachment A. The major components of Governor Warner’s 2006-2008 introduced budget that impact funding include:

· technical updates to continue and revise the SOQ, incentive, categorical, and school facilities accounts (new category that now includes Lottery and School Construction Grants Program accounts);

· support for increases in the employer share of fringe benefit rates paid to the Virginia Retirement System (VRS);

· a three percent compensation supplement for all instructional and support positions funded in the SOQ and other state-supported programs, effective December 1, 2006;

· new sales tax and Lottery revenue estimates;

· new composite indices for the 2006-2008 biennium;

· 2005 Triennial Census data;

· continuation of the SOL Web-based Technology Initiative funded through Virginia Public School Authority (VPSA) note proceeds;

· expansion of the interest rate subsidy program to support school construction over the biennium and the provision for a limited amount of literary fund revenue for loans;

· continuation of bonuses for eligible teachers who achieve National Board Certification.

Attachment B to this memorandum lists the estimated school division entitlements for fiscal years 2007 and 2008 for the SOQ, incentive, categorical, and school facilities accounts based on the Governor’s introduced 2006-2008 budget. Please note the new “school facilities” account category created as part of the revised state budget structure for Direct Aid to Public Education effective with the 2006-2008 biennium. This category includes the Lottery and School Construction Grants Program accounts, which are currently categorized as incentive accounts in fiscal year 2006. These two accounts are shown in the “school facilities” category in Attachment B and in the Excel calculation file described below. This is a change in classification only. There is no proposed change in the funding methodology or the use of the funds. In addition, the “direct grants” authorized by the General Assembly that are unique to certain school divisions are now categorized under “supplemental education.”

The entitlements shown in Attachment B are based on the Department of Education’s latest projections of March 31 average daily membership (ADM) for fiscal years 2007 and 2008. The entitlements shown in Attachment B do not include the supplemental education grants that are unique to certain school divisions. Several of the categorical account entitlements (Group IV accounts) shown in Attachment B are funded on a reimbursement basis and represent the department’s latest projected entitlements; however, final payments on these accounts in fiscal years 2007 and 2008 will be based on actual, eligible reimbursement requests submitted by school divisions.

In addition to the entitlement information contained in Attachment B, a downloadable Excel file has been created to assist school divisions in calculating projected state entitlements and required local matches for the SOQ, incentive, categorical, and school facilities programs in fiscal years 2007 and 2008. This file gives divisions the opportunity to change ADM to test the effect on projected state funding and projected local match requirements using the department’s projected ADM or a local projection of ADM. (Attachment B contains projected entitlement information for each school division in PDF format based on the department’s projected ADM and cannot be modified.) Although we have confidence in the accuracy of our ADM projections on a statewide basis, experience has shown that the accuracy of our projections for individual divisions may vary. When divisions believe that they have more accurate projections of their March 31 ADM, they are encouraged to substitute their estimates for those provided in this memorandum when using the Excel calculation file. Also, please note that changing the ADM in this file only changes the estimated funding for accounts that are funded on the basis of ADM. The estimated funding for all other accounts is unaffected by changing ADM in the file and, therefore, remains the same.

Attachment C to this memorandum provides detailed instructions for accessing the Excel file from the Department of Education Web site. The Excel file may be downloaded from the following Web address:

http://www.doe.virginia.gov/VDOE/Finance/Budget/calctools.html

Attachments D and E summarize several of the major data inputs that are updated in the calculation of Direct Aid accounts for the 2006-2008 biennium. Attachment D lists the sources of various input data updated for the 2006-2008 biennium; Attachment E shows the SOQ funded instructional salaries used for the 2006-2008 biennium.

It is important to remember that Attachment B and the Excel calculation template provide information that relates to the Governor’s 2006-2008 biennial budget as introduced. The House of Delegates and the Senate will have the opportunity to amend the Governor’s budget proposals during the 2006 General Assembly session. The General Assembly will adopt a final 2006-2008 biennial budget before the end of the session, which is scheduled for March 11, 2006; therefore, the estimated entitlements contained in Attachment B and in the Excel calculation template are projections only and are subject to change as a result of legislative action by the General Assembly at the 2006 session. The department will provide additional information during the General Assembly session as changes to the estimated Direct Aid entitlements occur.

After the conclusion of the session, projected entitlements based on final General Assembly actions will be sent to you in another Superintendent’s Memorandum. Please note, the fiscal year 2007 and fiscal year 2008 actual entitlements will be paid on the basis of final costs recomputed using actual March 31 ADM and other final program participation information that applies to each fiscal year and each program.

Special Note

Two recent corrections were made to the fiscal year 2007 and fiscal year 2008 division entitlements after the original Excel calculation file was posted on December 16, 2005. These corrections are reflected in Attachment B and in the revised Excel calculation file posted on December 21, 2005.

The first correction involves the recent submission by a school division of a corrected 2005 triennial school census count, which was higher than the original count submitted by the division. The Department of Education has approved the revised census count submitted by the division and projected fiscal year 2007 and fiscal year 2008 entitlements have been recalculated for all divisions using the revised census data. The projected entitlements for all other school divisions are reduced as a result of this census revision and the resulting redistribution of sales tax.

The second revision involves a correction to the state share of cost for the K-3 Class Size Reduction Program in fiscal years 2007 and 2008. It was recently determined that the composite index was incorrectly assigned to some divisions in the funding formula for this program, resulting in the calculation of an incorrect state share of cost for some divisions. The effect of this correction on individual school divisions may be an increase or decrease in the K-3 program entitlement in fiscal year 2007 and fiscal year 2008 depending upon whether the composite index that was incorrectly assigned to the division was higher or lower than the division’s correct composite index.

The updated Excel calculation file that was posted on December 21, 2005, should be used in place of the version that was originally posted on Friday, December 16, 2005. The original Excel file that was posted did not reflect the latest entitlements based on the approved census revision and the corrected K-3 Class Size Reduction Program calculation and should not be used. Please make sure that you download the revised Excel file for your use. Do not use the Excel calculation file if you downloaded it prior to the afternoon of December 21, 2005. The proposed appropriations in the Governor’s 2006-2008 introduced budget are sufficient to fund the revised entitlements that are based on these two corrections.

Questions regarding the Governor’s 2006-2008 introduced budget and projected fiscal year 2007 and fiscal year 2008 Direct Aid entitlements may be directed to Dan Timberlake, assistant superintendent for finance, or budget office staff at (804) 225-2025.

JLD/kcd

Attachments

http://www.doe.virginia.gov/VDOE/suptsmemos/2005/inf251a.pdf

http://www.doe.virginia.gov/VDOE/suptsmemos/2005/inf251b.pdf

http://www.doe.virginia.gov/VDOE/suptsmemos/2005/inf251c.pdf

http://www.doe.virginia.gov/VDOE/suptsmemos/2005/inf251d.pdf

http://www.doe.virginia.gov/VDOE/suptsmemos/2005/inf251e.pdf